Polish your strategy with these 3 essential forex trading tips

Forex trading is an exciting endeavor in a market that never sleeps, has abundant opportunities to profit from and while the risk may be high, there are ways for you to play it safe and minimize your exposure to downside risk. Keep reading to learn the most effective ways to refine your strategy for more consistent results.

Polish your strategy with these 3 essential forex trading tips

The number of forex traders is the markets is rising exponentially as investors across the financial sphere are realizing the potential and flexibility the forex market provides. In fact, the massive daily trading volume alone is enough to offer traders the liquidity and rapid execution speeds they need to make favorable trades at the best price throughout a trading session.

In this article, we’ll go through a few forex trading tips that you can take apply in your own forex trading strategies to take them to the next level.

 

  1. Timing is everything

If you haven’t already realized, proper planning and timing is the alpha and omega of winning trading strategy. Though this doesn’t only pertain to your entries and exits but to which markets you should be trading to begin with as well.

As you may already know, the forex market operates almost around the clock every day of the week and this is because even though it’s a decentralized market, the banks that participate in the market to facilitate trades have their respective trading hours. There are 4 major trading sessions; Sydney, Tokyo, London and New York with each one succeeding the other before the previous one closes. However, there are times where two trading sessions overlap for a couple of hours and the trading volume between the two sessions converges.

Trading during the overlap of two trading sessions is quite advantageous simply because there are more participators in the market and therefore higher trading volume and liquidity. This translates to faster trade execution and more competitive pricing.

Most traders like to trade during the overlap between the London and New York sessions because that’s where the most trading volume appears. This happens during the hours of 8 a.m – 11 a.m EST.

So, if you are looking for the most favorable time to trade USD or EURO – one of the most important forex trading tips is to trade the overlap between the European and American trading sessions. If you look at the numbers, more than 70% of all trades take place during this market overlap since the USD is the currency of all major forex pairs which are the ones that are traded the most and therefore enjoy the highest liquidity.

Also, since the market closes on weekends and traders avoid Mondays due to the price gaps that occur during the break – the most favorable days to trade are during the middle of week; Tuesday, Wednesday and Thursday.

Forex Trading Tips

  1. Volatility isn’t necessarily a bad thing

Simply put, when the markets aren’t moving, you shouldn’t be trading. Opportunity lies in the fast moving, volatile markets that jump several pips within a day. Therefore, you should be looking to find these fast-moving markets to take advantage of the increased volatility to time your entries for a favorable outcome.

Most of the time, surprise financial announcements by central banks and other unexpected events are the catalyst behind market volatility. For example, Brexit woes are a volatility indicator the GBP and trade war disputes sent the Yuan and the U.S dollar tumbling downwards. During these times of turmoil, the financial markets are ripe with opportunity and profit for the taking.

So, another important forex trading tip is to always be aware of the news. Especially, if you don’t particularly enjoy the increased volatility and risk that comes with it since you are likely going to stay ahead of any unexpected events and close any trades that might be affected.

For the opportunist traders, however, volatility brings plenty of desirable effects to the markets and together with properly planned entries and stop-loss orders, there is no reason to avoid taking advantage of the market uncertainty and gain some extra pips.

It all comes down to your risk appetite and how confident you are in your own forex trading strategies and your ability to manage your risk exposure.

 

  1. Use both fundamental and technical analysis

In forex, there are two schools of thought; those who religiously swear by technical analysis and their indicators and those that cite that indicators are lagging and therefore useless and the news are what essentially drives the markets.

Both approaches have their arguments for and against as well as their pros and cons, but there is no reason for you to solely rely on one of them exclusively. Since both methodologies have been proven to work multiple times by a variety of professional traders – the last of our forex trading tips, but certainly not the least, is that you can utilize both fundamental and technical analysis to confirm your bias and get an additional edge when developing your trading strategies.

For example, you can make your initial assessment using the fundamentals to get a clear view of the overall trend direction and then take advantage of technical analysis indicators and support and resistance levels to identify specific entry points and where to place your stop loss. Don’t deny yourself a more complete understanding of the market by focusing on one part of the equation – the most successful traders use fundamental and technical analysis to plot their trades.

Polish your strategy with these 3 essential forex trading tips 

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